Innovation Mandate: The Case For Less Regulation - InformationWeek
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11/17/2010
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Innovation Mandate: The Case For Less Regulation

One think tank fellow thinks the key to spurring innovation and creating jobs is to put a moratorium on regs in a handful of industries, but only temporarily. His proposal doesn't go far enough.

Before you take me to the woodshed for being a laissez faire anarchist (or, heavens to Betsy, a tea partier), I'm not advocating that we let Wall Street, Big Tobacco, and Humongous Nuclear, Gas & Electric run amok. The financial industry, in particular, doesn't have much of a leg to stand on when it comes to resisting new regulations.

What I'm saying is that we need to examine the entire regulatory infrastructure, from the broad-based Sarbanes-Oxley to nickel-and-dime industry regs, and evaluate whether they're actually producing long-term societal benefits or just choking off innovation, growth, and our ability to create jobs in the name of vigilance. Those regulations that don't serve this nation's interests in the short term are regulations that probably don't serve our interests in the long term. So get rid of them.

In an e-mail response to my question on this point, Mandel keyed on the need for consensus. "With the unemployment rate up in the 8% to 10% range, the trade-off between jobs and other goals gets temporarily shifted in the direction of jobs," he wrote. "Whatever the level of regulation you think appropriate on average, it should be less in a downturn."

Mandel continued: "You can see that countercyclical regulatory policy does not require me to take sides on the broader question of whether we need more or less government, on average. In fact, once you make the assertion 'more regulation is good' or 'less regulation is good,' then you inevitably end up with gridlock. Neither side wants to give up on their core values, and why should they?

"I want to make a simpler and smaller argument: As long as we are in the economic doldrums, let's agree that encouraging growing and innovative sectors is a good idea. And that means temporarily not adding extra regulations."

Fair enough. While arguing for stricter financial industry regulations, however, Mandel himself says "it's a mistake to view the post-2000 years as an era of untrammeled free-market capitalism." From 2000 to 2007, the bulk of the Bush years, "the regulatory apparatus of the federal government expanded faster than the private economy," he notes. The number of employees at federal regulatory agencies increased 36% during that period, he says, while private sector employment rose by only 4%. Adding the "bust years" of 2008 and 2009, federal regulatory employment increased "a stunning" 49%, Mandel says, while private sector employment fell by 3%.

One would think there are more than a few regulations from that bloated federal apparatus that should be put out of their -- and our economy's -- misery.

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